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There is a reason new Generation(with new Pokemon) always sell better than Remakes, even though remakes usualy have more/refined features.

There has never been a pokemon game that allowed you to catch all pokemon anyway, not even gen 1(no mew without hacking/events).
They can keep the number aviable around 500, and just rotate the aviable ones for each game.

Technically it is not an issue either, irc from a Pokemon Go datamine we know all pokemon models in 3D are about 1GB in total.
So even if we double or tripple that to 2000+ we would only be around 3Gb, which is nothing when switch cardriges can be up to 64 GB.

I'd be totally okay with it. I think it would probably be better to just way slow down new Pokemon though, maybe introduce like 20-30 a gen max or something., with even more of a focus on regional variants. I will admit that having several thousand Pokemon would make it difficult for me to keep up with it all as a middle aged man and I selfishly don't want it for that reasons.

Capping at 1000 will never happen though because it's not good for the series' marketing. It's mostly just me being a selfish old guy.

Also, if I could have it my way, Pokemon would be capped at 1000 and mostly be a nostalgia-driven franchise focused on refining the series mechanics, post-game content (like, we'd be getting stuff like gen 4/5 remakes with expanded post-games), and balance. And then alongside Pokemon, Game Freak would have another team developing another monster raising IP with entirely new designs that plays differently from Pokemon, meant to appeal to a new generation of children. Maybe the game could even have light Minecraft-eseque mechanics and an active battle system and things of that nature.